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Accounting & Auditing Update

The "Accounting & Auditing Update" is written by Tammy Whitehouse, a veteran business writer who has been a regular contributor to Compliance Week since 2005. Her work has also appeared in industry journals and periodicals including Journal of Business Strategy, Strategy & Leadership, Compensation & Benefits Review, Inc, Buyside, and myriad others. Whitehouse welcomes questions and comments from readers; she can be reached via e-mail at twhitehouse@complianceweek.com.

Deloitte CEO Joe Echevarria (left) has announced he plans to retire by the end of August to pursue his interest in public service. Current CFO Frank Friedman has been appointed by Deloitte’s board of directors to assume Echevarria’s position immediately until the firm completes its formal leadership election, which is currently under way. More inside.

Companies choosing to stick with the old COSO internal control framework this year might find a mention of that fact by auditors in the audit report. Deloitte says just as companies are required to disclose what framework they are following, “it would be appropriate” for auditors to disclose too. Deloitte says it has observed that most companies are moving forward adopting the 2013 framework this year in accordance with COSO’s guidance on moving away from the 1992 framework to the new version. More inside.

After Deloitte advanced its head of audit to CEO in February, the firm has appointed Joseph Ucuzoglu chairman and CEO of subsidiary Deloitte & Touche. Ucuzoglu says he has a handful of near-term priorities that focus on innovating the audit practice to elevate audit quality. “We want to really lay out a bold vision for the future of the audit profession,” he says.

PCAOB audit inspectors found fault with 21 percent of the audits inspected at Deloitte in 2014, lower than any rate delivered for any major firm since 2009 and lower than Deloitte’s failure rate from one year ago. The report also revealed a new format for PCAOB inspection reports. More inside.

The SEC has charged Deloitte & Touche with violating auditor independence rules after it failed to notice a consulting affiliate had a business relationship with an audit client. Deloitte says it discovered the violation and reported it after the firm put in place enhanced independence measures. Deloitte will settle charges for $1.1 million. More inside.

A Deloitte survey shows that a big majority want to see auditors providing assurance on more than just financial statements, and they want to see auditors making better use of technology. “Many investors are looking for broader and deeper insights that can help them make smarter, more informed decisions,” said Joe Ucuzoglu, chairman and CEO of Deloitte. Details inside.

According to a recent questionnaire from Deloitte of more than 170 technology, media, and telecom firms, 38 percent said they were leaning toward or had firmly decided on adopting the new revenue standard following the full retrospective approach. That means companies would present three full years worth of financial data beginning with the adoption of the new standard in 2018 as if they had been following the standard for those three years. Eric Knachel, an audit partner at Deloitte & Touche, says, “It is still early in the evaluation stage, but this is a significant shift.”

An upswing in corporate use of non-GAAP measures along with increased regulatory scrutiny of such reporting has inspired the folks at Deloitte to offer some tips on how to assess non-GAAP measures to assure they don’t run afoul of filing rules.

It’s not just regulators or professional associations calling the internal audit profession to transformation. Even chief audit executives in the trenches recognize the internal audit function needs to evolve to remain relevant, according to a recent Deloitte study that surveyed 1,200 CAEs worldwide to get a pulse on the state of internal audit. Tammy Whitehouse reports.

As the Securities and Exchange Commission continues its focus on use of non-GAAP accounting measures, accounting experts are advising companies to take a look at their internal controls and assure they are appropriate. Tammy Whitehousereports.